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Between 2020 and 2024, the Canadian economy grew by 1.5%. In that time, the standard of living of the average Canadian also declined by 2% (0.4% annually), the worst five-year decline since the Great Depression. Our GDP per capita also now sits at roughly 75% of the US level, down from about 90% in 2010. While labour productivity (GDP per hour worked) runs approximately 30% below America’s. The OECD predicts that real GDP per capita in Canada will fall for the third consecutive year in 2025. 

One possible explanation sits in our policy manuals. 

For decades, the standard for a “successful” Canadian government grant or tax credit has been a simple, binary question: How many jobs did you create? Or how many employees do you have?

The world has changed, but our policy manuals haven’t. Today, a five-person team in Kitchener can build a platform that generates millions in annual recurring revenue (ARR) and serves customers in a hundred countries. These “micro-multinationals” are the high-performance engines of the modern economy.

Many of these micro-multinationals are built by immigrants. Statistics Canada data shows that immigrant-owned businesses account for 25% of net job creation in the private sector while representing only 17% of all firms studied. Businesses owned by immigrants are more innovative and own more intellectual property than their Canadian-born counterparts, according to the same research. They're also 1.3 times as likely to be high-growth firms. And by some estimates, in provinces like Ontario, one in two entrepreneurs will have been born outside the country within the next decade. These are the founders our policy infrastructure should be designed to accelerate, and yet the headcount metric penalizes the very capital efficiency that makes them competitive globally.

The vast majority of Canadian startups enter the market with fewer than five employees, 93.3% of them between 2002 and 2014, according to Innovation, Science and Economic Development Canada (ISED). With the highest concentration of these high-growth companies in the information and cultural industries (6.0%), professional, scientific, and technical services (5.2%), and administrative services (4.4%).

These are precisely the sectors where small teams with strong IP can generate outsized economic returns.

Take, for instance, Zapper or Boardy. These aren’t companies that need a thousand-person payroll to be valuable. They are capital-efficient, leveraging AI and global digital networks to punch far above their weight. Yet, under our current system, a startup that keeps its team lean and its margins high might actually qualify for less government support than a bloated “consulting shop” that hires 50 people just to manage its own administrative overhead.

When we prioritize headcount, we are essentially telling our founders, “Don't be efficient. Be big.” That is exactly the opposite of what a winning startup needs to do in a global market.

The C.D. Howe Institute quantified just how far this inefficiency runs. By 2024, the average Canadian worker had only 41 cents of new machinery and equipment investment for every dollar enjoyed by their US counterpart. For IP products specifically, the number was 32 cents. US investment per worker in software is roughly double Canada’s. US investment in R&D is approximately four times higher.

Our headcount obsession also makes us easy targets for “Branch Office” economics. For years, Canada has lured global tech giants with the promise of talent and tax credits. These companies set up "hubs" in Vancouver or Toronto, hiring thousands of Canadian engineers.

On paper, the job numbers look fantastic. But look closer at the ownership. The Intellectual Property (IP) those engineers create isn't Canadian; it’s owned by a parent company in Silicon Valley or Seattle. 

The data confirms that we do a great job of building the knowledge, but a poor one of keeping it. Only 18.2% of Canadian businesses own any form of intellectual property, according to Statistics Canada's Intellectual Property Awareness and Use Survey. The Centre for International Governance Innovation found that more than half of industry-directed IP generated at Canadian universities is assigned to foreign companies. Nine of 15 universities they studied failed on the basis that most of the IP they generate is foreign-owned. In 2021, Canadian R&D-performing companies generated $8.9 billion in IP receipts, but the domestic share of those receipts has been declining steadily, from over one-third in 2017 to just over one-quarter by 2021. The IP Canada Report 2025 showed Canadian patent filings abroad declined 2% while international trademark applications dropped 11% to their lowest level since 2018.

When these global giants face a bad quarter, those “jobs” vanish in a single afternoon, as we saw in the brutal layoffs of 2023 and 2024. Canada is then left with nothing, no IP, no assets, and no long-term upside. We have effectively spent taxpayer dollars to train workers for foreign competitors.

If we want to lead by 2030, we must stop measuring the size of a company’s payroll and start measuring the strength of its foundation. 

The Council of Canadian Innovators’ (CCI) 'Mandate to Innovate' report , authored by policy director Laurent Carbonneau, makes the case for two fundamental shifts. First, measure success by how much Canadian-owned IP stays in the country. A 10-person company that owns a global patent is worth far more to our long-term GDP than a 500-person service firm that owns nothing. Second, make government a first customer. Instead of giving a startup a $100,000 grant buried in reporting requirements, the government should buy $100,000 worth of their product. Procurement provides market validation that no grant can match.

But there's a third metric policymakers should be watching, revenue per employee. High revenue-per-employee indicates a company has built a scalable product, not a labor-intensive service. When we obsess over job numbers, we reward the opposite.

At the launch of the Canadian SHIELD Institute, Benjamin Bergen, then CCI’s president, was direct about what’s at stake: “If we don't have a sense of economic nationalism, we're going to actually continue to see the erosion of our wealth and prosperity as we have for the last 25 years.”

Organizations like the Canada Startup Association (CSA), founded by my co-author, Tehmina Chaudhry, who was one of the earliest Startup Visa applicants to gain permanent residence in Canada, are trying to close this gap from the ground up. CSA has mentored over 500 startups and built international pathways through trade delegations and investor networking, connecting Canadian founders with markets in the Middle East, Europe, and Asia.

Through her work with the Global Angel Investors Network (GAIN) platform, Tehmina is also helping midwife a nationally sourced deal pipeline that connects early-stage Canadian founders with curated global investors, with an explicit commitment to support underrepresented and first-time founders. This is what IP retention infrastructure looks like when it's built by the people who actually navigate the system. Tehmina’s own trajectory, from immigrant entrepreneur to ecosystem builder, illustrates the central flaw in the headcount framework: the most valuable thing she’s creating isn't a large payroll but a network that helps Canadian-owned ideas find capital, scale globally, and keep their ownership here.

But the IP retention argument is not without critics. Canadian-American economist Robert D. Atkinson, president of the Information Technology and Innovation Foundation (ITIF), which runs the Centre for Canadian Innovation and Competitiveness (CCIC), has publicly rebutted this position, arguing that Canada runs a trade deficit on IP and that increasing the amount of domestic IP would not meaningfully impact productivity. 

But Atkinson's critique addresses the current stock of IP, not the structural incentives that determine where future IP gets created. If the policy framework continues to reward headcount over ownership, the deficit only widens. The question is whether Canada wants to be a country that generates knowledge for others to own, or one that builds the companies that own it.

The 2025 federal budget made some progress with the extension of programs like ElevateIP and the National IP Performance Review, but we are still tinkering at the margins of a broken system.

The Competition Bureau's landmark 2023 study found a ‘consistent and clear’ decline in competitive intensity in Canada between 2000 and 2020. Concentration rose in already-concentrated industries. Fewer new firms entered markets, and profits and markups grew, especially for companies that were already the most profitable. Statistics Canada research tells the rest of the story: large and medium-sized firms accounted for nearly the entire decrease in investment per worker between 2006 and 2021, and declining firm entry rates drove 30% of that investment collapse. Foreign-controlled firms were the worst offenders, contributing 30% of the decline in investment per worker while representing only 20% of total investment. That's branch-office economics in a single statistic: companies that don't own their future here don't invest in it either.

The headcount obsession feeds this cycle. It rewards scale over efficiency. It funnels public resources toward companies that are big rather than companies that are good. If we don't change the lens through which we view success, we will continue to fund our own economic decline.

We must stop asking founders, “How many people do you employ?” and start asking, "How much of this do you own?" A capital-efficient company with global customers and strong IP can do more for Canada’s long-term economy than a large payroll with no ownership upside.